Sometimes, those planning for retirement focus so much on building their assets, that they forget to plan for those assets in the event that they pass away. But at any age, estate planning is a crucial part of life that deserves a few moments of our attention. When you take the time to designate beneficiaries on your investment accounts, you potentially save your loved ones a lot of time and worry later on.
Beneficiary designations take precedence over wills and trusts. That means the person you name as a beneficiary will inherit the asset, usually without challenge in probate court. Naming beneficiaries also means the asset can pass straight to them, without the delays of the probate process.
Who can be a beneficiary? Anyone who depends upon you financially represents an obvious choice for the beneficiary. That could be a child, spouse, or any other adult that you would prefer to inherit your assets. You can even name a favorite charitable organization as beneficiary. If you don’t want to leave your assets directly to a dependent, you can name someone to manage the assets for them. But this is a more complicated estate planning maneuver and requires the attention of an attorney.
Do you need a contingent beneficiary? Yes, naming contingent beneficiaries is a great idea, and there aren’t really any drawbacks to doing so. Your primary beneficiary will be the person who you intend to receive your assets. But in the event that something happens to that person, your contingent beneficiary will inherit them instead.
Why should you update beneficiaries regularly? In short, because things change. You might get divorced, or your spouse passes away before you, so someone else should receive your assets. You might get remarried, or a beneficiary becomes disabled and unable to handle their finances. Additions to the family (such as new grandchildren) might also change your wishes.
And any time you close an account, perform a rollover, or start a new one, you will need to state your beneficiaries again. This important estate planning step only requires a few minutes of your time but should be reviewed every one to three years.
If you need more information on protecting your assets or planning for your future, call us to schedule an appointment.